February 24, 2018

TV Upfronts: Fingers in the Digital Dyke

The broadcast and cable TV networks have wrapped up their spring narcissistic extravaganzas that try to seduce TV buyers to invest their ad dollars in programming that will appear next fall.

The upfronts are a buggy-whip-technology-like annual ritual that each year are variously predicted: 1) To be the last upfront we’ll ever see, 2) to be more over the top next year, 3) to have lower CPMs, 4) to have higher CPMs, 5) to include online media, and 6) to feature mud wrestling. But when William Goldman wrote about Hollywood that “no one knows anything,” he could have been writing about the critics and pundits who write about the TV upfronts.

Logical, rational thinking based on current industry trends would clearly indicate that the upfront buying season can’t last much longer, because CPMs can’t continue to increase as broadcast and cable TV network audiences continue to decline – it’s an impossible situation that defies the economic laws of supply and demand.

Furthermore, as digital trading and real-time bidding (RTB) increases, it surely will be just a matter of several years until all broadcast (radio and TV) and cable TV inventory will be digitally traded. It’s logical to believe that advertisers will demand a digital trading model in order to bring the CPMs of TV down to the level of online and mobile CPMs. Certainly the digital flood of algorithmic trading is coming.

But not so fast, the TV networks are successfully keeping a finger in the digital dyke with the unspoken, shadowy, tacit support of the big agency conglomerates and massive advertisers who all want to keep TV network CPMs and prices high.

Here how the conspiracy works:

  1. The TV networks require that the big agency buyers submit their advertisers’ budgets before the upfront season starts.
  2. The TV networks then allocate how much inventory each advertiser will get and how much they will pay based on last year’s expenditures.
  3. The agencies want to spend more because their compensation depends, in part, on how much they spend, not necessarily how well they spend it, and agencies want to spend as much as they can so they can gain bragging rights (“WPP spends 33% of all network TV dollars, so we have more clout than anyone,” e.g.).
  4. The huge advertisers like ATT, P&G, Ford, etc. want to keep prices high and the upfront allocations of desirable inventory in tact because it blocks out poorer competitors. It’s the American Way – the rich get richer by keeping the poor in their place.

So, with these three powerful players in the media advertising cabal serving all of their self-interests, don’t expect the TV networks to pull their fingers out of the dyke and allow their inventory to be traded digitally at an auctioned CPM. That would be too democratic, too reasonable, and too catastrophic.

We’ll see how long the networks can keep their fingers in the digital dyke and keep their inventory away from algorithmic trading and RTB. But you have to look at how long it took other industries to address disruptive innovations – storage discs, newspapers, steel mills, auto companies (or ask Clayton Christensen) — even to have an opaque, cloudy look at the answer.

Thoughts On the Horse Race

Guest blogger, Nick Kotz, a Pulitzer-Prize-winning journalist and author, writes:
“Clicking around the TV channels unscientifically but hungrily last Thursday night, searching for facts and cogent analysis, it struck me that Keith Olbermann and Chris Matthews on MSNBC were at least fresher in their comments and more interesting – entertaining is perhaps the right word.
You are right on the mark with questions about the lack of questioning about the mantras of “experience” and “change.” Kinsley provided some sobering reality about the catch phrases in his New York Times piece on January 6th.
Listening to Obama’s victory speech – along with about 15 other well-meaning, upper-middle to upper income limousine liberal enthusiasts – I too was moved by the man and his words. Not to be the party pooper, I never expressed my thought to my friends that the speech was filled with fine rhetoric, well-delivered – appealingly calling for change without defining it – but, it could end up being very hollow when the opponents get down and dirty, and all of us start demanding specifics.
Another thought on the psychology and reality of the “horse race” which we all right-thinking bloviators so deplore every four years. Failure to address the key substantive issues and to define catch phrases such as “change” and “experience” is a failure of the media and news analysts. Having said that, the horse race is, in fact, a reflection of and measurement of public opinion at various stages of the election process. A given at the start is that most – a vast majority – of Americans have paid very little attention to the presidential contests at this point. And many who have paid attention have very shallow attachments to whichever candidates they say they favor. Stronger attachments come only after Labor Day of election year, and even then many voters remain only loosely committed until late in the process. And so it is quite natural that the results of an early primary – or polls just before that primary – will influence millions of voters who have barely, if at all, started thinking about the candidates.
What I’m saying is that the problem, if indeed it is a problem, goes well beyond the media’s obsession with the horse race. Non stop, informed, intelligent 100 per cent devotion to coverage of issues at this stage will have little effect relative to the powerful effect of early polls followed by early primaries. The American voter, who I believe over the long run has good common sense in picking political leaders, is at this stage going to jump on bandwagons, and be influenced by the very dynamics and dramatics of the horse race.”